Most entrepreneurs will require financial backing in order to get their start up off the ground, and while the first round of funding may come in the form of a bank loan or from friends and family, it won’t be long before outside investment is targeted. This will most likely come from an investor, also known as a angel investor.
When searching for investment, entrepreneurs must be well prepared to pitch their startup company to investors and therefore should anticipate the questions they will be expected to have the answers to. Failure to do so will only decrease your chances of receiving investment. To help, we’ve devised a list of 5 questions you need to know the answer to before pitching to investors and explain what you need to know:
1. Is there a market for your goods or service?
It is incredibly easy to start a business with an idea or concept. The difficult part is getting your idea off the ground, building momentum, making your first sale and then following it up with another. The easiest way to analyse whether there is a market is to ask yourself, would you buy from your business? Conducting research is also a useful method. If you are able to use ‘real life’ stats as evidence, your statements will be reinforced. Depending on the stage the business is at an investor would typically want to understand the nature of the marketplace, want to know your market intensions and positioning within the market.
2. What is the break-even of the business?
Financial information is likely to be one of the most analysed areas by an investor. He/she will want to see realistic projections and be confident of receiving a return on their investment. Ask yourself, what level of sales needs to be achieved to enable the business to break-even? This is the first milestone for any startup. An investor will not only need to know the numbers but will also want to know timings – how long will it take you to reach your goal?
3. Are you asking for sufficient working capital?
The above determines the amount of working capital required so that the business can survive. Calculate this and add a safety net percentage to ensure you are well prepared.
4. How much have you invested personally?
An investor will want to know and be assured that you are fully invested in your venture. If you are not investing any of your own personal cash why should an investor? Be prepared to explain what you’ve invested and explain the positive impact your investment has brought.
5. What are the planned returns for the investor?
Investors always like to know the expected return and exit, as originally planned. Let the investor know your full intensions: what percentage is on offer and what sort of returns can be expected? This proves that as a business owner you have a plan, strategy and recognise the input of the hard earned cash you are pitching for.